Keywords:

[secondary debtor; labor enforcement; Brazilian labor courts; labor liability; service provision; service contractor; TST;]

Summary:

Brazil’s Superior Labor Court now allows enforcement directly against subsidiary debtors once the main employer defaults, heightening companies’ financial exposure and demanding stricter oversight of third-party contractors.

Text:

In a recent virtual full-bench session, the TST reaffirmed 17 legal theses, transforming them into binding precedents in accordance with Article 896-C, paragraph 1 of Brazil’s Labor Code (CLT). This mechanism, enhanced by Internal Rule Amendment No. 7/2024, aims to standardize national case law and streamline proceedings on matters already consistently settled by the Court’s Panels and the Specialized Individual Disputes Section (SDI-1).

Among the topics addressed was the enforcement of judgments against secondary debtors. The precedent was established in the judgment of Case No. RR 247-93.2021.5.09.0672 and reads as follows:

“Labor enforcement may be redirected to the subsidiary debtor upon confirmation of default by the principal debtor, without the need to first exhaust attempts to collect from the primary employer or its shareholders.”

This binding formulation now applies to all Brazilian labor courts and has significant implications for companies that outsource services. Specifically, it eliminates the requirement to first attempt collection from the primary debtor before pursuing enforcement against the company held secondarily liable.

Broader Impact on Service Contracting Companies

This new precedent reinforces an interpretation that has already prevailed within the TST, particularly after the cancellation of the former Precedent No. 12, which had previously required prior attempts at enforcement against the primary employer. The new understanding prioritizes the efficiency of labor enforcement by allowing immediate redirection to the secondary debtor — even in cases of partial default.

While this is not a doctrinal innovation, the new binding nature of the rule drastically alters its legal force and imposes a stricter procedural obligation on lower courts. Judges at the trial and appellate levels are now required to apply this thesis without exception, barring extremely rare and well-justified circumstances.

From a corporate perspective, the precedent requires companies to reassess the risks involved in outsourcing. Given that mere nonpayment by the service provider can now trigger direct enforcement against the contractor, the financial liability of companies — particularly those engaging with small or undercapitalized service providers—becomes more acute.

Practically speaking, this removes from the secondary debtor the ability to challenge the order of liability during enforcement. Defense strategies must now focus on well-established arguments, such as the lack of fault in monitoring the service contract (when applicable) or procedural nullities in the earlier litigation phase.

Strategic and Preventive Measures for Companies

In light of the new binding precedent, companies must take a more proactive approach to managing labor risk in third-party engagements. Essential steps include:

A Shift Toward Enforcement Efficiency in Labor Law

The formal adoption of the thesis in RR 247-93.2021.5.09.0672 underscores a broader institutional trend: strengthening the effectiveness of labor enforcement at the expense of some traditional creditor protections found in civil law. For corporate counsel, this means adopting an even more preventive and strategic posture.

While case law standardization may enhance legal predictability, it does not eliminate risk; rather, it calls for careful legal planning and proactive governance. In this new environment, companies must closely monitor outsourced contracts and act decisively during the early litigation phase to reduce the chance of being held financially liable.

Finally, the procedural innovation introduced through Internal Rule Amendment No. 7/2024 — and the use of virtual sessions for jurisprudential reaffirmation — highlights the TST’s commitment to procedural modernization and consistent case law. However, it also signals the urgent need for companies to adapt their contractual and litigation strategies to avoid unnecessary liabilities.

Veridiana Moreira Police – Partner (Labor, Employment and Social Security)

Brunna Louise Spedro Arantes - Senior Associate (Labor, Employment and Social Security)